Credit Suisse expects more consolidation in Swiss finance sector in 2017

Credit Suisse (CSGN.S) says it expects additional consolidation inside the financial sector in Switzerland subsequent year, as smaller sized nearby banking institutions seem for scale so that you can combat growing expenses.

Smaller sized Swiss personal banking institutions, which for a long time benefited from customers bringing cash into Switzerland to make the most of the country's bank secrecy guidelines, are struggling beneath a international clampdown on tax evasion and escalating regulatory prices.

Looming fines below a tax agreement amongst Swiss banking institutions plus the U.S. Division of Justice have stored some probable purchasers within the sidelines and produced some banks unattractive merger targets, but nearly all of the banking institutions concerned have now resolved their scenarios.

"We expect extra consolidation while in the FIG (Money Institutions Group) sector, in particular wealth management and retail banking," Marco Illy, head of investment banking for Switzerland at Credit Suisse, informed Reuters.

"It's a scale point. The fixed price base is going up, so that you need to have scale to deal with a increased value base. These companies with assets of twenty billion Swiss francs ($21 billion) and under are the most challenged."

The amount of personal banking institutions in Switzerland is likely to fall to under a hundred in the upcoming three to 5 many years from 136 in 2015, a report by consultancy PwC said on Tuesday.

In February, Swiss personal bank EFG International announced it could acquire rival BSI from Grupo BTG Pactual SA for one.06 billion Swiss francs ($1.1 billion) to produce Switzerland's fifth-biggest wealth manager.

"That could set off outright consolidation, new small business models and digitalization as being a way of industrializing the method. We could see combinations of non-competitively pertinent operations which assistance executing mid and back office processes," Illy said.

Credit score Suisse CEO Tidjane Thiam has said that he needs his bank to take component in consolidation in Switzerland, which could possibly be facilitated through the first public providing of its Swiss Universal Financial institution, planned by the end of 2017.

Thiam has also explained that he's in talks with yet another financial institution about a cost-sharing prepare, within a bid to cut back Credit score Suisse's value base.

Illy stated that a recent trend of inbound Chinese M&A into Switzerland, most notably with ChemChina's $43 billion takeover of Swiss pesticides and seeds group Syngenta, was set to continue into 2017, as well as much more outbound M&A.

"Swiss companies could reap the benefits of strong balance sheets and cheap financing to search abroad for growth, particularly within the Americas and Asia. Switzerland is a small domestic market so companies have to grow internationally."

The market for original public offerings should do better than in 2016 which has seen just 3 listings in Switzerland, Illy said.

"There are five or six prospective IPO candidates. We could see possible activity from the healthcare and biotech sector, succession planning-led business enterprise and sponsor exits."
The float of 20 to 30 percent of Swiss Universal Bank is expected to be the greatest IPO subsequent 12 months, with Credit score Suisse hoping to raise up to 4 billion Swiss francs.

So far this 12 months, Credit Suisse is the largest fee earner in Switzerland, which accounts for 4 percent of the EMEA fee pie, Thomson Reuters data shows. The financial institution has earned $78 million for services ranging from merger and acquisitions' advisory services to capital markets, or 12 percent of this year's fee wallet.

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